Fiscal Policy

We empirically test the effects of unanticipated fiscal policy shocks on the level and growth rate of real output and reveal different types of asymmetries in fiscal policy implementation. The data used are quarterly U.S. observations over the period 1967:1 to 2011:4. In doing so, we use six alternative vector autoregressive systems in order to construct the fiscal policy shocks.

This paper argues that any assessment on the intentional stance of fiscal policy should be
based upon all the information available to policymakers at the time of fiscal planning. In
particular, real-time data on the discretionary fiscal policy "instrument", the structural
primary balance, should be used in the estimation of fiscal policy reaction functions. In

We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: federal, state and local. We find that increases in federal, state and local government employments are all negatively associated with economic growth.